Councils pleading poverty have put 16billion in the bank despite railing against 'Dickensian' cutsReserves up by 15.5%, from 14.2billion in 2011 to 16.4billion this yearA third of councils' annual spending now put straight into the bank

Councils have salted away an extra 2.2billion in the last year – while stepping up their campaign against the Government’s ‘Dickensian’ cuts.

Official figures reveal that council reserves have rocketed by 15.5 per cent, from 14.2billion in 2011 to 16.4billion this year.

The figures emerged as local authorities launched a two-pronged attack on ministers over ‘grossly unfair’ cuts that will require them to trim their budgets by an average of 1.7 per cent next year.

The Labour leaders of three cities – Newcastle upon Tyne, Liverpool and Sheffield – yesterday warned that the cuts would cause increasing social unrest in the North, which they claim has been hit harder by austerity than the South.

Ministers were also under attack from rural authorities.

They claimed that the shire counties were the hardest hit by the latest round of reductions, which comes on top of a package of 27 per cent cuts announced in 2010.

But Local Government Secretary Eric Pickles accused councils of scaremongering.

‘People will be surprised that councils are hoarding billions whilst at the same time some are pleading poverty,’ he said.

‘Whilst local authorities should maintain a healthy cushion, it’s time for them to tap into their substantial reserves to ensure they protect frontline services.

‘Given the rise in reserves it is irresponsible that some sections of local government have chosen to needlessly scare the public with unfounded predictions of doom and gloom.’

Earlier this month the Audit Commission also called on councils to ‘strike a balance between the needs of current and future taxpayers’ after finding that reserves had risen by 36 per cent in real terms over the previous five years.

The leaders of three of England's biggest cities have warned government cuts will lead to chaos on the streets, such as that seen in London during the riots of 2011

The spending watchdog said reserves
were now equal to a third of councils’ annual spending – up from a
quarter five years previously.

The leaders of Newcastle, Liverpool and Sheffield accused ministers of taking a ‘Dickensian’ approach.

The three councils have a total of more than 300million in reserves.

In a letter to a newspaper, they
wrote: ‘Rising crime, increasing community tension and more problems on
our streets will contribute to the break-up of civil society if we do
not turn back.

‘The unfairness of the Government’s cuts is in danger of creating a deeply divided nation.

‘We urge them to stop what they are doing and listen to our warnings before the forces of social unrest start to smoulder.’

A coalition of 120, mostly Tory, rural councils may take legal action against the Government over the latest round of cuts.

The Sparse group of local authorities said it was considering a judicial review of the spending reductions.

Roger Begy, chairman of Sparse, said: ‘Rural authorities for the last ten to 12 years have been seriously under funded in relation to urban areas.’

The Department for Communities and Local Government said: ‘Councils must keep doing their bit to tackle the inherited budget deficit because they account for a quarter of all public spending and still get through over 114billion of taxpayers’ money each year.

‘The local government settlement [from the Government] is a fair deal arming councils with an average spending power of 2,240 per household.

'It is fair to the North and South, and fair for rural and urban areas.’